Question
A & G Financial Inc. is investigating possible investment opportunities for the coming period. Two independent projects of an equal life of 10 years are
A & G Financial Inc. is investigating possible investment opportunities for the coming period. Two independent projects of an equal life of 10 years are available; Project A and Project B, and their information are given below. MARR (Minimum Acceptable Rate of Return) for A & G Financial Inc. is 10%.
| Project A | Project B | |
| Capital Investment | $300,000 | $620,000 |
| Annual Revenue | $75,000 | $155,000 |
| Annual Express | $21,000 | $61,000 |
| Salvage Value | $45,000 | $90,000 |
a) Which project(s) should A & G invest in using Rate of Return analysis?
b) What is A & G 's MARR that makes the two projects equivalent?
c) What project(s) should A & G invest in using Future Worth analysis?
d) Suppose the MARR is 4% and A & G must only choose one project, which one should it be? ( Hint: you can answer this part without more calculations based on your answers to the first three parts?
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The Economics Of Money Banking And Financial Markets
Authors: Frederic S. Mishkin
12th Global Edition
1292268859, 978-1292268859
